Google claims the option to prevent public contact exposure through Buzz was always there, just not obvious enough. So they've clarified the Buzz setup process, made blocking followers easier, and explaining how followers without Buzz/Google profiles are publicly displayed.

Whether you call it a huge privacy flaw or just an annoyance, Google Buzz can put the contacts you…
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Does it seem to you like Google underestimated how seriously people would take having even a small part of their inboxes exposed to the world? Yeah, well, us too. Still, Google does seem to have moved quickly to at least make opting out of public follower/folowee listing a more prominent option, if not necessarily a default.

The first point, regarding public profile follow listings:

1. More visible option to not show followers/people you follow on your public profile
If you don't want to share the lists of people who are following you and people you are following publicly on your profile, you can always opt out during the profile set-up when you first use Buzz or at any time from the edit profile page. We are making this option more prominent in the set up process, to ensure everyone who wanted to hide these lists can do so easily.

That's certainly a help for anyone getting into Buzz just now. Then again, Google touts in the same post the "tens of millions of people" who have logged into Buzz in some way, creating 9 million posts and comments, and those folks have to discover the non-public option on their own. The post also explains that blocking new followers is one of the two options you'll see when you jump into Buzz, and that followers without a public profile won't be seen in your profile until they create one.

If you had to rewrite Buzz's privacy settings from the beginning, how would you carve out what's public and what's not? Detail your dream setup in the comments.